Seems there is high demand for high yield debt

Vipal Monga

Senior Editor

Low rates are encouraging junk-rated companies to borrow money at record levels, according to Thomson Reuters LPC.

High-yield borrowing totaled roughly $850 billion through the end of November, according to LPC, more than the $785 billion borrowed all of last year, and already higher than the previous record of $825 billion for all of 2007.

“Most of this growth is based on the strength of the high-yield bond market,” said Thomson Reuters in a report issued Monday. The data provider noted that high-yield bond issuance through Nov. 28 totaled $295 billion, up 34% from a year ago, and 116% higher than 2007.

The volume of leveraged loans totaled $550 billion, near the $566 billion borrowed all of last year, but below the 2007 record of $688 billion.

Companies such as HCA are jumping into the market to capitalize on investor demand for securities with relatively high yields. The hospital operator said Monday it plans to borrow $1 billion from the bond market for dividend payments to its shareholders. The company already borrowed $2.5 billion on Oct. 16 to fund another dividend.

David Anderson, HCA’s senior vice president – finance and treasurer, said in an emailed statement: “Potential future tax rates on dividends was just one of several considerations [for the debt issuance and dividend payments]. Other factors in our decision to provide this return to our shareholders included the current low interest rate environment and market conditions.”